If the Share Price Rises Substantially Above the Conversion Price,an

question 83

Multiple Choice

If the share price rises substantially above the conversion price,an advantage to the corporation would be:

• A) the premium would decrease.
• B) the floor price would offer the investor downside protection.
• C) the bond would most likely be converted into common shares and the debt would not have to be repaid.
• D) the firm could raise the capital needed by issuing fewer shares than those sold from the conversion of the securities.

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Definitions:

Return

The income generated from an investment, expressed as a percentage of the original investment cost.

Discounted Payback

A payback period calculation that takes into account the time value of money by discounting each of the cash flows from the project at a particular rate before it sums them to determine the break-even point.

Payback Period

The time required for the return on an investment to "pay back" the sum of the original investment, commonly used as a measure of investment risk.

Profile

A description or analysis of the characteristics, qualities, or activities of a person, organization, or thing.